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Review of Div 7A: What to expect


Division 7A (which is about private company distributions) of Pt III of the Income Tax Assessment Act 1936 has recently been the subject of a post-implementation review by the Board of Taxation. So far, the Board has released two discussion papers for consultation, the second of which outlines five proposed reforms to improve the operation of Div 7A. Those five proposed reforms consist of a unified set of rules based on the principle of transfers of value, a better targeted framework for calculating a company’s profits, a simpler, more flexible and better targeted system of complying loans, greater flexibility for trusts that reinvest unpaid present entitlements as working capital, and a self-correcting mechanism.

This article examines selected issues considered in the second discussion paper and proposes some alternative options. The authors believe that these reforms would significantly improve the operation of Div 7A and assist both taxpayers and advisers alike.

Author profiles

Damien Burke ATI
Damien is a chartered accountant and director at Koustas & Co. He joined in 2001 and has been assisting medium and large companies from diverse industries with taxation and business advice. His clients have benefited from his broad taxation expertise and commercial acumen, including those in the construction, property, engineering, medical device, communications, motor vehicle and recruitment industries. Damien graduated with a Bachelor of Business (Accountancy) degree from RMIT and completed a Graduate Diploma of Chartered Accounting. He is a member of the Institute of Chartered Accountants in Australia, and an associate member of The Tax Institute. He is also a member of the Self Managed Superannuation Funds Professional Association of Australia, and is currently completing accreditation as an SMSF specialist adviser. - Current at 17 October 2013
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Hercules Koustas CTA
Herc is a chartered accountant and the founding director of Koustas & Co. With over 20 years' experience, he advises clients on accounting, taxation, business and corporate advisory matters. Herc's diverse client base includes both private businesses and large corporates. They range from manufacturing, engineering, robotics and automation, medical device, communications and primary production to retail, wholesale and construction businesses. He also assists multinational organisations to establish and operate local branches and subsidiaries in Australia, New Zealand, Europe and the US. After graduating with a Bachelor of Economics degree from Monash University, Melbourne, in 1988, Herc went on to gain his chartered accounting qualification and later, his Certificate of Public Practice. He is a Fellow of the Institute of Chartered Accountants in Australia, and a Chartered Tax Adviser. He is also a member of both the Self-Managed Superannuation Funds Professional Association of Australia and Australian Institute of Company Directors, and is a registered tax agent. - Current at 25 May 2011
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Sanjin Geljic CTA
Sanyin joined Koustas & Co in 2005. He brings broad experience to the firm in areas of compliance accounting, business advisory and tax consulting for the small to medium enterprises market. He currently focuses on advising clients and assisting them with income tax, capital gains, fringe benefits, business structuring, superannuation and retirement-planning matters. Having graduated with a Bachelor of Business degree (with an accounting major) at Monash University, he later attained his chartered accountancy qualification. Recently, he gained a Master of Applied Taxation at UNSW which was prompted by his desire to continue to add value to his clients' businesses, and to assist them in complex tax matters. - Current at 19 April 2017
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